Ottawa creates aid program for large firms, with ‘strict’ conditions to apply

Minister of Finance Bill Morneau holds a press conference to speak about the government's measures to help Canadians with the effects of COVID-19 pandemic from West Block in Ottawa on March 27, 2020. Andrew Meade/iPolitics

The federal government has announced a new program that will offer financing for large companies hit hard by the COVID-19 pandemic, with conditions to apply on executive pay, environmental disclosure and how the credit is to be used.

Finance Minister Bill Morneau and Innovation Minister Navdeep Bains announced on Monday morning the Large Employer Emergency Financing Facility (LEEFF), which will be available for firms with $300 million or more in annual revenue and that are seeking $60 million or more in loans.

Ottawa will also expand the existing Business Credit Availability Program to mid-sized companies. These firms will be able to receive up to $60 million, with guarantees of up to $80 million.

The Liberal government has promised for weeks sector-specific support, including for the airline and oil and gas industries. Monday’s announcement instead offers a broad-based liquidity program.

Prime Minister Justin Trudeau said Monday that this program is not meant to offer bailouts to Canada’s largest corporations and that Ottawa is acting as a “lender of last resort.”

“Let me be clear: These are bridge loans, not bailouts,” he said during his daily news address.

Speaking in Toronto, Morneau emphasized that the program will offer credit for companies in all industries — except for the financial sector — in order to survive the crisis, protect jobs and prevent bankruptcies. He said there will be “strict limits” on what recipient companies can do on things such as executive pay that are meant to protect Canadian taxpayers.

Access to the LEEFF, which is being delivered through Canada Development Investment Corporation, comes with a number of strings attached: firms must have “significant operations or workforce in Canada,” must not have been convicted for tax evasion and must not be involved in active insolvency proceedings.

Morneau said large companies with the capacity to manage their finances through the crisis will not be eligible.

“The money is intended for firms that need it. It’s not low-cost lending for those who don’t need it, nor is it to rescue companies that were already facing insolvency before this crisis,” Morneau said. “It’s there to make sure that companies that came into this crisis on a strong footing, get to the other side, and can rebound quickly.”

Any support through the program cannot be used to restructure firms. There will be limits on company actions on dividends, share buy-backs and executive pay. Recipient companies will also need to commit to respecting workers’ collective bargaining agreements and protecting employee pensions. Finer details on conditions, as well as a cost for the program, were not immediately released.

Ottawa will also assess a company’s employment, tax and economic activity in Canada, as well as its international organizational structure and financing arrangements. While convicted tax evaders will be barred from the program, very few firms have been convicted for such violations in Canada.

Trudeau said in order to “stand strong against tax avoidance and tax evasion,” Ottawa will require companies to share their corporate financial structure as they apply for funding.

Warm reaction from big business, Conservatives critical

The Business Council of Canada, which represents the country’s largest companies, welcomed the new program in a statement, saying it was an “important step” to help larger firms access bridge financing they could not otherwise get through conventional means.

“We look forward to seeing additional details about the measures unveiled today, but there is no doubt at all about the need,” said president and CEO Goldy Hyder.

Morneau said the program is meant to help firms in the energy sector, as well as companies such as Air Canada and WestJet.

The Canadian Association of Petroleum Producers had called on Ottawa to provide more credit support for larger companies. In a statement, president and CEO Tim McMillan said the sector is still waiting for more details on the program, but “this much needed loan support is critical at this time for major employers to survive and keep Canadians employed.”

The LEEFF may pressure oil and gas firms to increase efforts to lower emissions. Trudeau said Ottawa is expecting energy firms to “put forward a frame within which they will demonstrate their commitments to reducing emissions and fighting climate change.”

Speaking this morning, Conservative Leader Andrew Scheer said the LEEFF isn’t enough to help the oil and gas sector.

“If this is it, this is not what was promised or what was expected,” he said. “Minister Morneau promised an industry-specific package to the oil and gas sector that would address the very unique set of circumstances and very specific challenges that the sector is facing.”

In a statement Monday afternoon, Conservative finance and industry critics Pierre Poilievre and Michelle Rempel Garner said nothing in the program provides “the clarity that businesses and workers have been looking for.”

“There are no clear timelines, no clear eligibility criteria, no job guarantees, no budget, no transparency and no safeguards to protect taxpayers,” said Rempel Garner.

The two MPs also voiced concerns that the requirements only restrict, rather than ban, recipient companies from share buybacks, bonuses and dividends and that Industry Canada will be reviewing applications rather than an arms-length government agency.

NDP Leader Jagmeet Singh wrote on Twitter that the government must ensure financing for large firms is tied to creating or maintaining Canadian jobs.

“Help must go to workers, not to CEOs. And any company cheating the public by not paying their fair share of taxes must not get any help from the public,” he said.

Certain large not-for-profit businesses, such as airports, will also have access to the LEEFF.

Bains said Ottawa is also studying the challenges of different sectors that would inform what further assistance is needed and what is needed to help to succeed once the crisis is over.